Public Disclosure Authorized Afghanistan Resource Corridor Development: Power Sector Analysis Public Disclosure Authorized 11 July 2012 Public Disclosure Authorized John Irving & Peter Meier Public Disclosure Authorized Contents Exchange rate ............................................................................................................... ii Calendar Conversion .................................................................................................... ii Abbreviations and Acronyms ...................................................................................... iii Executive Summary ...................................................................................................... iv 1. Background .............................................................................................................. 1 1.1 Context .................................................................................................................. 1 1.2 Objective ............................................................................................................... 2 1.3 The mining projects ............................................................................................... 3 2. Afghanistan’s Power Sector .................................................................................... 4 2.1 The power system .................................................................................................. 4 2.2 Electricity demand and load forecasts ................................................................... 4 2.2 Generating projects ............................................................................................... 7 2.3 Import arrangements .............................................................................................. 8 2.4 Power System Planning Studies ............................................................................ 8 Power Sector Investment Programs .......................................................................... 9 Ongoing Studies ...................................................................................................... 10 3. Evaluation of Future Supply Options ................................................................. 11 3.1 Introduction .......................................................................................................... 11 Renewable energy ................................................................................................... 11 Cost estimates ......................................................................................................... 11 3.2 Hydro ................................................................................................................ 12 3.3 Coal .................................................................................................................. 14 The coal resource .................................................................................................... 14 Cost of the coal project ........................................................................................... 15 3.4 Gas ....................................................................................................................... 17 3.5 Oil ........................................................................................................................ 18 3.7 Imports .............................................................................................................. 19 Export Potential of the CAS ................................................................................... 19 HVDC Import Options ........................................................................................... 20 4. Transmission system expansion ........................................................................... 23 4.1 Existing Transmission Plans ............................................................................... 23 4.2 Constraints of Power Transfers between Asynchronous Systems ...................... 28 4.3 Proposed Plan to Support and Extend MJAM’s Mining and Power Station Project ......................................................................................................................... 30 Project Costs ........................................................................................................... 32 Financing ................................................................................................................ 33 5. The Carbon Footprint ........................................................................................... 35 5.1 GHG emissions .................................................................................................... 35 5.2. Coal project design ............................................................................................. 36 5.3 World Bank screening criteria for coal projects .................................................. 37 i 5.4 GHG emission consequences of generating technology choices ........................ 39 5.5 Conclusions ......................................................................................................... 40 6. Regulatory and institutional requirements ......................................................... 42 6.1 Institutional and regulatory framework ............................................................... 42 6.2 Grid code .............................................................................................................. 42 7. Conclusions and Recommendations ...................................................................... 44 Power sector issues ..................................................................................................... 44 The Resource Corridor power generation projects ..................................................... 47 Recommendations ...................................................................................................... 49 Annex I: Opportunity costs ........................................................................................ 51 Salang Pass constraints .................................................................................................. 51 Potential conflicts with CASA-1000 .......................................................................... 53 Potential Conflicts with proposed rail lines ................................................................ 54 Railway Electrification ............................................................................................... 55 Constraints on the Shibar Pass route .......................................................................... 56 Conclusions ................................................................................................................ 56 Annex II: Revised Electrical Design Standards for Kabul ..................................... 57 Annex III: Procedure for Synchronisation with CAS Countries ........................... 59 Annex IV: Scope of Proposed Project and Associated Project Costs ..................... 62 Exchange rate 1 US dollar = 49.2 Afghani Calendar Conversion Gregorian Afghan year year 2008 1386 2009 1387 2010 1388 2011 1389 2012 1390 ii Abbreviations and Acronyms AEIC Afghanistan Energy Information Center AFISCO Afghanistan Iron & Steel Corporation ADB Asian Development Bank ARTF Afghanistan Reconstruction Trust Fund B/B back-to-back CAS Central Asian States (Turkmenistan, Tajikistan, Uzbekistan, Kyrgyzstan and Kazakhstan) CCGT combined cycle gas turbine CDM Clean Development Mechanism DABS Da Afghanistan Breshna Sherkat (Afghanistan Power Company) ERR economic rate of return FIRR financial rate of return FS feasibility study FSU Former Soviet Union GDP gross domestic product GHG greenhouse gas GHG greenhouse gas GNI gross national income HH household HVAC high voltage alternating current HVDC high voltage direct current ICE Inter-ministerial Commission on Energy IDC interest during construction IFI international financial institution IPCC Intergovernmental Panel on Climate Change LRMC long run marginal cost MEW Ministry of Energy and Water MoM Ministry of Mines MJAM China Metallurgical Group Corporation mmBTU million British thermal units MoU Memorandum of Understanding MV medium voltage NCM million cubic metres NEPS North-eastern Power System PPP private-public partnership RCD Resource Corridor Development RoW rights-of-way SS substation SEPS South-eastern Power System SIL surge impedance loading T&D transmission and distribution TA technical assistance UAP Uzbekistan-Afghanistan-Pakistan (HVDC electricity trade project) USAID Unites States Agency for International Development WTP willingness-to-pay iii Executive Summary ____________________________________________________________________ 1. This report examines the power sector implications of the Resource Corridor Development (RCD) proposal. The mining developments that form the core of the RCD are not just potential consumers of power, but also a potential source of power for Afghanistan, since the large generation projects necessary to serve the extraction and processing of ores can readily be sized to meet more than just the mining project demand. Significant deposits of coal and reservoirs of gas make such generation possible. 2. This has potentially important impacts not just on the generation expansion plan, but also on the configuration of the transmission system. In particular it represents an opportunity to integrate with and thereby diversify Afghanistan’s